32 Wash. 344 | Wash. | 1903
Appellant, as receiver of the Bay Lumber and Shingle Company, a corporation organized under the laws of Washington, brought this action against respondent. The second amended complaint in substance avers that on November 26, 1899, the respondent was both a stockholder and trustee in said corporation, and that on said date he sold his stock in the company to the company itself, and received therefor from the corporation, out of its assets, the sum of $834.50; that the corporation thereby attempted to reduce its capital stock, contrary to law; that at said time the corporation was indebted to divers persons, which indebtedness has not yet been paid, and claims therefor have been presented to appellant as receiver; that the purchase of said stock was to the prejudice of the creditors of the corporation, in that the creditors have not been paid; that the corporation was insolvent at the time this action was commenced, and the receiver has now no funds in his hands with which to pay its debts. Judgment is demanded against respondent in the sum he received from the corporation for his stock. Respondent demurred generally to the second amended complaint, and the demurrer was sustained. Appellant elected to stand upon said pleading, and refused to plead further. Whereupon the court entered judgment that appellant shall take nothing by his action, and that respondent shall recover costs. This appeal is from said judgment.
The only error assigned is that the court sustained the demurrer and entered judgment against appellant. Respondent insists that the complaint does not allege that the money which was paid him for his stock was a part of the capital stock, and that no allegation nega
In Barto v. Nix, 15 Wash. 563 (46 Pac. 1033), a bank accepted the stock of a stockholder in payment of his indebtedness to. the bank. It appears that this was done in order to protect the bank from loss, and that it was the intention to re-issue the stock. This court upheld the transaction on the ground that it was a bona fide one for the purpose of protecting the corporation from loss. But the stock was re-issued to other stockholders, and no reduction of the capital stock resulted from the transaction. The court observed in that case, at pages 568 and 569, that:
“It may be conceded that a corporation in this state cannot traffic in its own stock. Such we believe to be the rule established in all the states having similar statutory provisions. But it does not follow that it may not receive such stock in payment of the indebtedness of one of its stockholders, when such transaction is bona fide and for the purpose of protecting the corporation from loss.”
It follows that the demurrer should have been overruled. The judgment is reversed and the cause remanded, with instructions to the lower court to overrule the demurrer.
Eullerton, C. J., and Anders, Mount and Dunbab, JJ., concur.